Puerto Rico's economic and political problems

Puerto Rico fails to make $58-million debt payment

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The government of Puerto Rico confirmed Monday that it had failed to make a $58-million debt payment, a significant escalation of the fiscal crisis facing the U.S. island territory. Puerto Rico made a partial payment of $628,000 in interest but could not afford to make the remainder, which was due Saturday, because the Legislature did not appropriate the funds, said Melba Acosta Febo, president of the Government Development Bank. The government had warned that it would not make the payment and argued that it should not be considered a default under a technical definition of the term, an argument rejected by Moody's Investors Service and others. "This event is consistent with our belief that Puerto Rico does not have the resources to make all of its forthcoming debt payments," said Emily Raimes, a vice president at Moody's. "This is a first in what we believe will be broad defaults on commonwealth debt."

Currently there is no legal process for Puerto Rico to declare bankruptcy:

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Garcia's administration has pushed for the right for Puerto Rico public agencies to file for bankruptcy under Chapter 9, which officials say would allow an orderly restructuring of the debt, but the proposal has not drawn any Republican cosponsors in the U.S. Congress. The White House has said that no federal bailout is planned.

Under current law, Chapter 9 applies to municipalities. However, Puerto Rican bonds were treated as tax-exempt, in the same way as municipal bonds.

In some ways, Puerto Rico's problems mirror those of Detroit: Detroit's population peaked at 1.8 million in 1950 but it has lost almost two-thirds of that since then. Many of the industries that supported that population closed up or moved away. Puerto Rico's population peaked later, in 2000, but it has been losing population since then, and at a faster rate since 2010. There's also a "brain drain" since many Puerto Ricans have left to seek economic opportunities in other parts of America. The employment-population ratio is only 34.5% in PR, compared to the national average of 59%. A difference of over 24%. And besides, the unemployment rate there is 12.2%, compared to 5.5% national average. The employment-population ratio is the more revealing statistic though because labor force participation is much lower in PR. GDP is down by about 12-13% since 2006.

This article in Fusion adds more details about the problems in PR:

The tragedy of Puerto Rico, America’s very own Greece

Just two of the problems from a long list:

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Just 40% of Puerto Rico’s adult population is either employed or looking for work. The population of Puerto Rico has already shrunk by about 10% in the past 10 years, and is going to keep on shrinking by about 1% per year at least until 2020, which means ever-fewer people supporting an ever-rising debt burden.

Last I heard, the Republican congress doesn't want to do anything to help them.
There's probably more to be said, but hopefully that should be enough to start a discussion.

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